UK Manufacturing Rebounds to Best Performance Since August - PMI Surges in January

British manufacturing has delivered its strongest momentum in months, with January’s PMI data revealing a decisive turnaround after a subdued end to 2025. The sector has not performed this well since August 2024, signaling a meaningful shift in factory activity and business sentiment across the country.

New Orders Reach Four-Year High, Export Growth Returns

The most striking development in the January PMI report centers on new orders, which experienced their largest surge in nearly four years. The new orders sub-index climbed to 53.2, up sharply from December’s 50.2 level, according to data compiled by Jin10. This marks the highest reading since February 2022, and what makes this particularly significant is the revival of export orders—the first expansion in export demand recorded over a four-year period. This signals that UK manufacturers are successfully tapping into international markets after an extended period of weakness. The final manufacturing PMI itself increased to 51.8 from December’s 50.6, exceeding the preliminary estimate of 51.6 and confirming the sector’s recovery is solidifying.

Business Confidence Strengthens Despite Employment Headwinds

The broader business sentiment has markedly improved, with confidence metrics rebounding to levels not seen since the autumn 2024 budget announcement. According to Rob Dobson, Director at S&P Global Market Intelligence, “UK manufacturing has entered 2026 with a tangible resilience that appeared less certain just weeks ago. The recovery extends beyond mere data points—management teams are expressing genuine optimism about near-term prospects.” This upbeat outlook contrasts with persistent employment challenges. While manufacturing jobs continued to decline in January, the pace of contraction slowed meaningfully, representing the smallest reduction in headcount since employment taxes increased in October 2024. The modest improvement in hiring conditions suggests businesses are cautiously preserving workforce capacity.

Rising Input Costs Create Margin Pressure

One lingering challenge for manufacturers centers on production costs. Business input costs reached their highest level since August 2025, intensifying pressure on already-squeezed profit margins. This represents the continued burden manufacturers face despite the encouraging top-line momentum in orders and sales. The combination of strong demand alongside elevated input expenses underscores the delicate balance manufacturers must navigate as 2026 unfolds.